First quarter 2002 prescription drug spending: Higher again, but rate of increase drops

June 04, 2002

ST. LOUIS, June 4, 2002 - The nation's rapid upward trend in prescription drug spending continued during first quarter 2002 but at a slightly lower rate of 19.3 percent compared to 19.8 percent in first quarter 2001.

For the entire year 2001, spending increased 16.9 percent according to the 2001 Express Scripts Drug Trend Report. Last year, the average wholesale price (AWP) cost was $592.05 - an $85.42 increased above the 2000 figure of $506.63 AWP.

As suggested by the first quarter 2002 trend decrease, Express Scripts is forecasting that 2002 annual spending growth will slow to 15.9 percent. The company, one of the nation's leading pharmacy benefit management firms, predicts that the average cost in 2002 will reach $686.19 for an increase of $94.14.

"We began to see some moderation in utilization during the first quarter, resulting in a slight decrease in the upward cost trend. Lower utilization will continue to play a role, but big impact on spending will also come from new generics, especially generic versions of ACE inhibitor cardiac drugs ZestrilÒ and PrinivilÒ and a generic form of the gastrointestinal drug PrilosecÒ, if court action clears the way," said Barrett A. Toan, Express Scripts chairman and chief executive officer.

"The Express Scripts Drug Trend Report, now in its sixth year, provides our clients, policy makers, the health care community and consumers with a better understanding of the dynamics underlying current drug cost increases and future drug cost trends," continued Toan. The full 2001 report will be released on June 4, at the annual Express Scripts Outcomes Conference in St. Louis.

The actual 2000-2001 increase for Express Scripts' clients generally ranged from 5 percent to 35 percent, depending on the extent to which plan sponsors chose to implement Express Scripts' cost management programs.

Higher Prices, Increased Utilization Drive Drug Trend

In the 2001 Express Scripts Drug Trend Report, more than half the increase in total spending - 56.8 percent -- is attributable to a rise in per prescription costs due to higher prices and use of more expensive medications. Increased utilization accounted for 37.3 percent of the increase, while the introduction of new drugs in 2001 was responsible for 5.9 percent.

The 6.3 percent jump in the utilization of prescription drugs available in 2000 and 2001 played a major role in causing this year's overall spending increase to exceed that of last year. In fact, utilization growth in 2001 was at the highest rate seen since Express Scripts began monitoring drug trends in 1993. Conversely, anticipated increased use of less-expensive generic medications and moderation in the utilization growth trend should help lower the annual rate of increase in total prescription drug spending in future years.

For the fourth consecutive year, inflation in drug prices - at 5.5 percent in 2001 - topped 5 percent. Price inflation accounted for 35 percent of the overall 2000 - 2001 drug expenditure increase. Future price increases for prescription drugs are likely to remain at this annual five plus percent level, according to Express Scripts Drug Trend Report forecast of prescription drug spending.

Prescription Drug Spending Concentrated Last year also saw a concentration of prescription drug spending in a limited number of therapeutic categories. Slightly more than 50 cents of every dollar spent on prescription drugs went for drugs in just 10 of 99 therapeutic categories: Antihypertensives, antidepressants, antihyperlipidemics (cholesterol reducers), gastrointestinal drugs, antidiabetics, antirheumetics, antiasthmatics, antihistamines, calcium channel blockers and dermatologicals.

Drugs in these 10 therapeutic categories also accounted for more than 55 percent of last year's total spending increase. Notably, among drugs in these 10 categories, medicines used to treat ulcers, depression and cholesterol accounted for 25 percent of all prescription drug spending in 2001 at $50.53, $50.20 and $48.06 respectively per member per year, as well as 28 percent of last year's total spending increase.

"Antihyperlipidemics, the medicines used to treat high blood cholesterol, were the third most used therapy class, after blood pressure and antidepressant drugs. In recent years, dramatic increases in the use of antihyperlipidemics have been spurred by evidence that their use reduces mortality, new guidelines that increase the total number of patients eligible for treatment and extensive direct-to-consumer advertising," said Toan.

Consumers Expect to Pay More, Request Generics With prescription drug spending continuing to go up, Americans with prescription coverage expect to pay more of a skyrocketing cost largely absorbed until now by employers and health plans.

A consumer opinion survey conducted for inclusion in the 2001 Express Scripts Drug Trend Report found 74 percent of those surveyed expected to pay more out-of-pocket costs for prescription drugs in the next two to three years.

Many respondents already are controlling out-of-pocket costs by requesting substitution of generic for brand name drugs to lower co-payments. According to the survey, 61 percent and 58 percent of respondents indicated they regularly ask the pharmacist and doctor, respectively, to substitute the generic form of the branded name product to save money.

"Thus, to take advantage of the large number of generics coming to market over the next several years, most members will not object to well designed generic incentive programs," observed Toan. He added that products facing generic competition through 2006 represent 26.7 percent of the entire 2001 pharmaceutical market.

COX-2 Drugs - New Findings Show Wide Use for Short Term Pain Relief Among other studies to be presented at the Express Scripts Outcomes Conference are analyses of utilization patterns for COX-2 inhibitors, a newer and widely used class of agents used to treat arthritis, acute pain and other disorders.

While equal in efficacy to traditional non-steroidal anti-inflammatory drugs (NSAIDs), like naproxen and ibuprofen, COX-2 drugs - CelebrexÒ, VioxxÒ, and BextraÒ - come at a much higher dollar cost. This added cost, say some studies, is justified by the added reduction in the risk of gastrointestinal side effects. However, key findings from the Express Scripts' studies challenge some of the assumptions in these claims of cost-effectiveness.

Comprised of three studies, the COX-2 analyses found that:

·Approximately 24 percent of new COX-2 users had a diagnosis of osteoarthritis, rheumatoid arthritis, or dysmenorrhea, all of which are approved indications.

·One in three new COX-2 users had a diagnosis for low back pain, a condition that has not yet been listed as an approved indication for COX-2s.

·Less than 40 percent of COX-2 users had evidence of being at risk for gastrointestinal adverse events, calling into question the overall cost-effectiveness of their use in 'real world' practice.

·Over half of the new COX-2 users had less than a 60 days supply over one year of follow-up, suggesting that these agents are not being reserved for those requiring long term therapy, where the risk of gastrointestinal adverse events is of greatest concern.

·The rate of concomitant gastro-protective agent use (e.g., proton pump inhibitors such as PrilosecÒ or H2 antagonists such as ranitidine) among COX-2 users was higher than among non-selective NSAID users, contradicting the assumptions of cost-effectiveness models.

·Approximately half of chronic COX-2 users took aspirin for cardio-protective effects. Half of these users were taking doses of 325mg/day or higher, more than considered necessary for cardio-protection and also negating the gastrointestinal protective effects of COX-2s.

"Although we expected to see COX-2 drugs prescribed for conditions other than FDA approved indications, the extent of 'off-label' prescribing was higher than anticipated. Additionally, the extent of short term use, the substantial use in patients not at risk for gastrointestinal adverse events, and the higher than expected rate of co-prescribing with other costly gastro-protective agents, calls into question the cost-effectiveness of the overall use of COX-2s in routine clinical care," explained Express Scripts' Manager of Outcomes Research, Emily Cox, Ph.D., lead researcher for the studies.

Based on these studies, Express Scripts will continue to recommend that physicians start patients who are not at risk for gastrointestinal events on a generic NSAID before progressing - if necessary - to a COX-2. The approach is known as step therapy. "Physicians make the final prescribing decisions based on what they believe is best for their patients. We hope the information provided by our studies of COX-2 utilization proves useful to them," added Cox.

"COX-2 drugs aside, aspirin therapy has been shown to confer numerous benefits, although use at too high a dose can put an individual at risk for gastrointestinal complications. Individuals may not be aware of the potential for gastrointestinal adverse events from taking too high a dose on a daily basis. When taking aspirin for its cardio- protective effect, patients should ask their doctor if taking only one 'baby aspirin,' a day - about 81mg -- is sufficient" observed Cox.

Data Sources: 2001 Express Scripts Drug Trend Report
The analyses contained in the 2001 Express Scripts Drug Trend Report are based on prescription medications for a sample of Express Scripts commercial clients that maintain individual member eligibility, while also using Express Scripts for both retail network and mail pharmacy services. Because of the unique demographics and drug coverage for Medicaid recipients and for Medicare beneficiaries receiving drug coverage through Medicare Plus Choice plans, data from these two groups are excluded from the study. The resulting samples of 3 million members in each of the years 2000 and 2001 consist of about two-thirds non-managed care commercial members and one-third managed care commercial members.

Data Sources: Consumer Opinion Survey Knowledge Networks conducted the consumer opinion survey for Express Scripts. Respondents were consumers aged 21 to 64 years old who have health insurance through their employer or union. The survey was conducted between November 7, 2001 and November 19, 2001, using Knowledge Networks' nationally representative web-enabled panel. The resulting sample consisted of 1,145 adults. Results had a +/- 3.1 percent margin of error with a 90 percent confidence interval.

Data Sources: COX-2 Studies
The studies of COX-2 usage were based on medical and pharmacy claims data of a Preferred Provider Organization in the Midwest for new COX-2 users, identified as patients with a prescription for a COX-2 from January 1, 2000 to May 31, 2000 and no COX-2 prescription in the 12 months prior. The study of concomitant use of COX-2s and over the counter pain relievers is based on a telephone survey conducted in December 2001 and January 2002 among members receiving COX-2 medication through mail order selected from an Express Scripts client located in the Northeast.
Background on Express Scripts
Express Scripts, Inc. is one of the largest pharmacy benefit management (PBM) companies in North America. Express Scripts provides integrated PBM services, including network pharmacy claims processing, mail pharmacy services, benefit design consultation, drug utilization review, formulary management, disease management, medical and drug data analysis services, medical information management services and informed decision counseling services through its Express Health LineSM division. The company also provides distribution services for specialty pharmaceuticals through its Specialty Distribution subsidiary. Express Scripts is headquartered in St. Louis, Missouri. More information can be found at, which includes expanded investor information and resources.

This press release contains forward-looking statements, including, but not limited to, statements related to the company's plans, objectives, expectations (financial and otherwise) or intentions. Actual results may differ significantly from those projected or suggested in any forward-looking statements. Factors that may impact these forward-looking statements include but are not limited to:

·risks associated with our acquisitions of Phoenix and NPA, including integration risks and costs, risks of client retention, and risks associated with the operations of acquired businesses

·risks associated with our ability to maintain internal growth rates, or to control operating or capital costs

·continued pressure on margins resulting from client demands for enhanced service offerings and higher service levels, and the possible termination of, or unfavorable modification to, contracts with key clients or providers

·competition, including price competition, and our ability to consummate contract negotiations with prospective clients, as well as competition from new competitors offering services that may in whole or in part replace services that we now provide to our customers

·adverse results in regulatory matters, the adoption of new legislation or regulations (including increased costs associated with compliance with new laws and regulations, such as privacy regulations under the Health Insurance Portability and Accountability Act (HIPAA)), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulation

·the possible loss of relationships with pharmaceutical manufacturers, or changes in pricing, discount or other practices of pharmaceutical manufacturers

·adverse results in litigation, including a pending case challenging Express Scripts' business practices under the Employee Retirement Income Security Act (ERISA)

·risks associated with our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements

·risks associated with our ability to continue to develop new products, services and delivery channels

·general developments in the health care industry, including the impact of increases in health care costs, changes in drug utilization and cost patterns and introductions of new drugs

·uncertainties regarding the implementation and the ultimate terms of proposed government initiatives, including a Medicare prescription drug benefit

·increase in credit risk relative to our clients due to adverse economic trends

·other risks described from time to time in our filings with The Securities and Exchange Commission

We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Contact: Ryan Soderstrom, Director, Corporate Communications
(952) 837-5160
David Myers, Director Investor Relations
(314) 702-7173

Kupper Parker Communications

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